The board of Tian Teck Land Limited (HKG:266) has announced that it will pay a dividend of HK$0.08 per share on the 17th of October. However, the dividend yield of 6.6% still remains in a typical range for the industry.

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Tian Teck Land Might Find It Hard To Continue The Dividend

We aren't too impressed by dividend yields unless they can be sustained over time. While Tian Teck Land is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.

If the trend of the last few years continues, EPS will grow by 23.9% over the next 12 months. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unless this happens fairly soon, the dividend could start to come under pressure.

Check out our latest analysis for Tian Teck Land

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of HK$0.46 in 2015 to the most recent total annual payment of HK$0.14. Dividend payments have fallen sharply, down 70% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Tian Teck Land has seen EPS rising for the last five years, at 24% per annum. Even though the company is not profitable, it is growing at a solid clip. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Tian Teck Land that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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